The far-wrong: European populists are gaining support by moderating their economic agenda

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In recent years, European economies have seen tough times. Due to several energy crises linked to supplies from Russia, EU residents have faced higher inflation, increased refinancing rates, and slowing economic growth. The EU’s GDP grew by only 1.1% last year — and even that was an improvement on the 0.4% figure from 2023. The European Commission does not expect significant improvement and forecasts that growth will remain around the same level in 2025, increasing to 1.5% in 2026.

A year ago, former European Central Bank (ECB) head Mario Draghi, who once saved Europe from a debt crisis, presented his plan for reforming the bloc. But none of those proposals have been implemented. Additional problems have come from abroad, with Donald Trump launching a trade war and Vladimir Putin continuing his war in neighboring Ukraine. Yet internal political crises have caused almost as much disruption. For example, the dissolution of the French government in September drove the yield on the country’s thirty-year bonds down to 2008 levels.

Still, the general concerns that Draghi identified have not yet produced an acute crisis anywhere in the union. “There are currently no European countries in a situation so catastrophic that radical reforms are required,” notes Konstantin Sonin, a professor of economics at the University of Chicago. Indeed, in historical terms, Europe’s current slow growth is not extraordinary, and several Eastern European countries are still showing decent GDP and income growth.

However, the wave of inflation that recently swept through Europe has hit the least well-off segments of the population particularly hard — and it is their support that now underpins the popularity of far-right forces. These parties poll disturbingly well in France and Germany, and in the Netherlands they briefly headed a governing coalition. The paradox is that even before coming to power, far-right movements often have a negative impact on the economy: moderate politicians, faced with such opposition, often fear adopting painful-but-necessary reforms that are sure to cause short-term political pain while promoting long-term economic gain.

Meloni’s trauma saves Italy

In her youth, Italian Prime Minister Giorgia Meloni infamously called Benito Mussolini “a good politician” and expressed non-judgmental views on fascism. But today she can hardly be classified as far-right — her government hands down long prison terms to extremists and prosecutes those performing “Roman salutes.”

Meloni’s economic policy is also far from far-right. Over the past three years, her government has been gradually reducing the country’s budget deficit. Back in 2023, the authorities allocated tens of billions of euros to support businesses and households during the energy crisis. And in 2024, Meloni cut income tax rates for the middle class. Combined with low healthcare spending, this prompted trade unions to organize mass protests. Still, Italy expects to bring its budget deficit into compliance with EU rules by the end of 2025 — a year earlier than previously planned.

Meloni is fighting the deficit to rein in Italy’s massive public debt, which stands at 137% of GDP. The IMF classifies this as a “moderate” fiscal risk. However, that assessment is based on mitigating factors such as the ECB’s ability to intervene and the market’s confidence that the EU is monitoring the debt and will not allow it to spiral out of control — this according to Lukas Guttenberg, senior advisor at the Bertelsmann Stiftung, and Nils Redeker, deputy director of the Jacques Delors Centre.

For Meloni, avoiding an increase in public debt and not alarming investors are key priorities, according to people familiar with her thinking. The debt crisis that brought down her political mentor, Silvio Berlusconi, remains such a painful memory for the sitting PM that it continues to influence all of her decisions. As a result, Italy lags behind other NATO members when it comes to increasing spending on defense and security.

“Lazy” Greeks and the six-day workweek

In Greece, which is still recovering from the 2015 debt crisis, a six-day workweek was introduced in 2024. This came under the government of Kyriakos Mitsotakis, leader of the right-liberal New Democracy party. His cabinet believes this is one of the most effective ways to address labor shortages, as about 500,000 people have left the country since 2009.

Previously, Greece had a 40-hour workweek, but it has now been extended to 48 hours. Workers may still choose a five-day schedule, but with additional hours on weekdays. Employees are paid a 40% bonus for working on Saturdays, and 115% for Sundays and holidays. Despite these measures, trade unions have already criticized the reform, and people have taken to the streets.

“When almost all other civilized countries are introducing a four-day workweek, Greece has decided to go in the opposite direction,” said Akis Sotiropoulos, a member of the executive committee of the Adedy public sector union. “In reality, this decision was made by a government ideologically focused on securing greater profits for capital.”

Other critics of the reform argue that it will effectively bury the five-day workweek, as the lack of government oversight in workplaces will allow employers to impose the more profitable six-day schedule.

Migrants divide the Netherlands

In early June, the Dutch government collapsed after the leader of the far-right Party for Freedom, Geert Wilders, withdrew from the ruling coalition. The reason was a dispute over migration policy.

Wilders proposed a plan for a drastic reduction in immigration that included deploying the army to ensure security and patrol the borders. He also suggested sending all asylum seekers back to the border and closing refugee accommodation centers.